In 2024, the mortgage market is showing encouraging signs for borrowers, with an improvement in borrowing conditions after a gloomy 2023. Here are five positive points to bear in mind.
1. Lending rates are falling
Several broker networks have confirmed that lending rates are stabilising or even falling at some banks. After rising steadily since mid-2022, interest rates are no longer rising, according to brokers Vousfinancer and Empruntis. At almost one bank in two, rates are stable, while at the others they are falling by between 0.15 and 0.40 points. According to Vousfinancer, average rates in January were 4% for a 15-year mortgage, 4.20% for a 20-year mortgage and 4.50% for a 25-year mortgage.
2. Usury rates are high
Usury rates are the maximum rates above which a bank is not allowed to lend money, depending on the term of the loan. For loans of 20 years or more, the rate is now 6.29%, up 0.18 points on last December.
In 2022 and 2023, it was these usury rates that blocked the applications of many borrowers, even though they were creditworthy: the rise in borrowing rates was faster than the rise in usury rates. Following the decision by the Banque de France and the Ministry of the Economy to calculate interest rates on a monthly basis, the trend was reversed, with usury rates rising by almost 3 points compared with 2 points for lending rates over just over a year. The gap between current lending rates and usury rates is now wide enough that it is no longer a barrier. Since the start of the year, rates have been calculated on a quarterly basis.
3. Attractive financing terms
In order to limit the debt levels of the French population, the Haut Conseil de Stabilité Financière (HCSF - French High Council for Financial Stability) made certain rules compulsory when granting loans. But since last December, it has relaxed these requirements slightly. It is now possible to borrow over 27 years for the purchase of an old property with work equivalent to at least 10% of its value (instead of 25%). And bridging loans are now excluded from the calculation of the effort ratio limited to 35% of income, if they do not represent more than 80% of the value of the sale.
In addition, the zero-rate loan (PTZ) has been extended until 2027. Granted to first-time buyers to purchase their principal residence, it does not include any bank interest to repay. The income brackets for eligibility have been increased. Some banks are offering to double the legal amount of the PTZ, i.e. €20,000 or €25,000 over a maximum of 20 or 25 years.
Others are offering subsidised loans, particularly for first-time buyers who are not eligible for the PTZ, for amounts of up to €50,000, at rates of between 0% and 3.5%. These loans are generally conditional on the borrower's age, the completion of works or the purchase of a property with an excellent energy performance rating (DPE).
4. Investors can borrow again
Banks are once again showing more flexibility towards buyers of second homes or those looking to invest in rental property. The credit tap was virtually turned off for them for the whole of 2023.
On the other hand, it is still difficult to obtain a loan for more than 20 years for such an investment. The borrowing rate may also be increased by 0.10 points.
5. The return of 30-year loans
Some banks are offering loans of up to 30 years. In this way, they are using their flexibility margin of 20% of their quarterly loan production, for which they can waive the criteria of the HCSF, which limits the duration of loans to 25 years (with some exceptions).
But beware, rates for these longer loans can be quite high, exceeding 5.8%.
Translated with DeepL.com (free version)
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